It was about two years ago this summer when Glaukos Corp. (NYSE: GKOS) received notice from the federal government that it would trim prices for its products that treat glaucoma.
“We are aware of and extremely disappointed” with the changes made by the Centers for Medicare and Medicaid Services, Chief Executive Thomas Burns said in a statement at the time.
After the price cuts became known, shares of the Aliso Viejo-based maker of products to treat glaucoma fell in half in the subsequent months.
The shares struggled to regain momentum, hovering in the $40 range until May when two significant events occurred.
Sight Sciences Inc. (Nasdaq: SGHT) competes with Glaukos in selling products for microinvasive glaucoma surgery, also called MIGS. Sight Sciences makes a system called Omni for lowering intraocular pressure in adults with glaucoma, a market that is estimated at $6 billion annually.
On June 1, the Menlo Park-based company was notified that a Medicare Administrative Contractor (MAC) filed a proposal to call “investigational” a microinvasive glaucoma surgery for Part B Medicare benefits in Kansas, Nebraska, Missouri, Iowa, Indiana and Michigan.
“The company strongly disagrees” with the proposal, Sight Sciences said in a SEC filing. “If finalized, this determination would lead to non-implantable MIGS procedures being non-covered in these states for Medicare beneficiaries.”
These states accounted for approximately 8% of Sight Sciences Surgical Glaucoma revenue in 2022. The company’s revenue rose 46% to $71.3 million in 2022. It had previously forecast it would grow another 25% to 32% this year.
Previously in 2020, another subcontractor called Palmetto also proposed non-coverage of non-implantable MIGS.
“The ophthalmic community, comprising leading surgeons, medical societies, and patient advocacy groups, was successful in providing information that led to Palmetto withdrawing their proposed policy,” Sight Sciences said.
In the trading session after the June 1 proposal became known, Sight Sciences shares fell 21% to $7.52. Since then, it rebounded to $8.53 and a $413 million market cap.
The reimbursement issue is a reminder about why investors shy away from medical device makers that rely on government bureaucrats trying to cut costs rather than patients who pay in cash for products.
GKOS Benefits
Shares of Glaukos, best known for the iStent that is among the smallest medical devices ever made, have clearly benefited.
Since the news on Sight Sciences became known, Glaukos’ shares have risen to a two-year high near $70 and a $3.3 billion market cap.
“Sentiment on GKOS is through the roof following two proposed MAC rules listing SGHT’s product as “investigational,” Piper Sandler analyst Matt O’Brien wrote in a June 9 note to investors.
In the past two years, Glaukos has struggled to rebuild its revenue, which declined 3.8% to $282.9 million in 2022.
Glaukos’ shares began climbing May 3 after it released first-quarter results.
“I’m pleased with our strong start to the year highlighted by a return to solid top-line growth in the first quarter, reflecting the execution of our commercial strategies thus far in 2023,” Burns said in a statement.
Altogether since May 3, Glaukos’ shares are up about 50%.
Some of the company’s biggest stock bounces have occurred following bad news for its competitors.
In 2018, Glaukos’ shares jumped 40% to a then all-time high after Fort Worth, Texas-based competitor Alcon pulled its MIGS device, the CyPass Micro-Stent, from the market, citing a lack of efficacy.
